Liquidia Corporation — Q3 2022 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2022. Liquidia is a biopharmaceutical company focused on pulmonary hypertension. Revenue primarily comes from its agreement with Sandoz to promote generic treprostinil injection; its lead candidate, YUTREPIA, had FDA tentative approval but was not commercially approved.
Financial results
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $3.2m | $3.2m | $10.6m | $9.6m |
| Cost of revenue | $0.7m | $0.9m | $2.2m | $2.3m |
| Gross profit / approximate gross margin | $2.4m / 76.6% | $2.3m / 72.0% | $8.4m / 79.5% | $7.3m / 76.2% |
| Research and development | $4.5m | $4.5m | $14.5m | $15.1m |
| General and administrative | $6.7m | $4.9m | $26.2m | $14.6m |
| Operating loss | $(8.8)m | $(7.1)m | $(32.3)m | $(22.4)m |
| Net loss | $(9.1)m | $(7.3)m | $(34.5)m | $(23.0)m |
| Net loss per share | $(0.14) | $(0.14) | $(0.58) | $(0.47) |
Cash and cash equivalents were $98.3m at September 30, 2022, versus $57.5m at year-end 2021. Current assets were $103.1m and current liabilities $7.5m. Long-term debt was $19.7m; total liabilities were $37.5m. The filing reports no dividends.
For the first nine months, operating cash used was $24.0m, investing cash used was $0.1m, and financing provided $64.9m, producing a $40.8m increase in cash. Financing included $54.5m net proceeds from an April stock offering and proceeds from debt refinancing. Cash paid for interest was $1.1m.
Changes versus prior comparable periods
- Q3 revenue was essentially unchanged year over year; nine-month revenue increased 10%. The Sandoz profit share was 50% in 2022; higher unit sales offset the lower share compared with earlier 2021 periods.
- Nine-month operating loss widened $9.8m and net loss widened $11.5m. G&A rose 79%, mainly from higher stock-based compensation, YUTREPIA commercialization preparation, and litigation costs. R&D declined 4%, primarily due to lower YUTREPIA clinical costs and purchase timing.
- Operating cash use improved by $2.5m year over year, while financing inflows increased substantially, mainly due to the 2022 equity offering.
- Shares outstanding increased to 64.46m at September 30 from 52.29m at December 31, 2021, largely reflecting the April offering of 11.27m shares.
Outlook, risks and unusual items
- Management expects continued operating losses and says cash, under its current plan and available borrowings excluding contingent tranches and future YUTREPIA revenue, should fund operations and covenant compliance into 2024. It also expects it will likely need additional capital before a potential YUTREPIA launch; actual cash use may differ from estimates.
- The $40m SVB/Innovation facility had $20m funded. An additional $5m was available at the company’s discretion through December 31, 2022; two $7.5m tranches depended on YUTREPIA approval and sales milestones. Management said the latter tranches were unlikely to be available given the litigation. Interest floats at the greater of 7.25% or prime plus 4%; the facility matures December 2025. The company reported covenant compliance at quarter-end.
- In the patent case, the court found the asserted ’793 patent valid and infringed and ordered that YUTREPIA’s final FDA approval date cannot be earlier than the patent’s 2027 expiration. Both parties appealed; Liquidia’s stay request was pending. The PTAB had separately found the patent unpatentable, but that decision did not displace the court order absent appellate affirmation. The appeal and related proceedings are material uncertainties for launch timing and financing access.
- United Therapeutics’ trade-secret case remained in discovery after Liquidia’s motion to dismiss was denied in October 2022. A separate RareGen-related case is proceeding to determine damages on a breach-of-contract claim; any Liquidia PAH proceeds are subject to litigation funding arrangements.
- Revenue is concentrated: the Sandoz promotion agreement generated approximately 97% of Q3 revenue and 98% of nine-month revenue. One customer represented 98% of accounts receivable. The company also relies on third parties and single-source suppliers for key product inputs and devices.
- Other notable risks include potential pump shortages affecting generic treprostinil access, generic competition, inflation and higher interest costs. The company stated all cash was held at Silicon Valley Bank. No material off-balance-sheet arrangements were reported.
Important facts for investors to verify
- Current status and likely timing of the Federal Circuit appeals, the stay motion, and the PTAB rehearing or appeal concerning the ’793 patent—and their implications for YUTREPIA approval and launch.
- Cash runway and financing needs against operating cash use, the $41.1m minimum-cash covenant described by management, debt interest terms, and availability of any undrawn facility amounts.
- Progress toward YUTREPIA commercialization, regulatory requirements, manufacturing readiness, market access, and competitive position, including Tyvaso DPI exclusivity risks.
- Trends in Sandoz-related sales and profit share, customer concentration, generic competition, and availability of infusion pumps and cartridges.
- Potential effects of ongoing litigation, including costs, possible damages, and the allocation of any RareGen litigation proceeds.